The Asian Development Bank (ADB) has issued a significant downward revision to its economic growth outlook for developing Asia and the Pacific.
According to a special update to its flagship economic forecasts, the region faces mounting pressure from prolonged disruptions in the Middle East, leading to spiked energy prices, tightened financial conditions, and a sharp acceleration in inflation.
The ADB now projects regional growth at 4.7% in 2026 and 4.8% in 2027, a notable decrease from the 5.1% growth previously forecasted for both years in April. Meanwhile, regional inflation is expected to surge to 5.2% this year—up from 3.0% last year—before seeing a moderate easing to 4.1% in 2027.
“We are confronting systemic, long-lasting disruptions to global energy and trade networks, not just temporary volatility,” said ADB President Masato Kanda. “Our revised outlook reflects the deepening crisis. ADB will remain an agile partner in protecting the region’s economy, tracking fast-moving risks, and moving with urgency to scale up our support.”
The revised projections are driven by the enduring nature of the conflict, which has compromised energy production and vital transport routes. The outlook is particularly grim for economies heavily dependent on imported fuel, tourism, and external financing.
The ADB’s baseline assumes oil prices will average $96 per barrel in 2026—a drastic increase from the $69 per barrel average seen in early 2024. In a more severe “downside scenario” involving further escalation of the conflict, regional growth could plummet to 4.2% this year, while inflation could soar as high as 7.4%.
To navigate these turbulent conditions, the ADB brief outlines a strategic framework for regional governments:
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Market-Based Pricing: Policies should focus on price stabilization rather than suppression. Allowing energy price pass-throughs can encourage conservation and investment in renewables, whereas generalized subsidies risk distorting the market.
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Targeted Fiscal Support: Financial aid should be time-bound and directed specifically toward vulnerable households and the most affected industries to contain fiscal costs.
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Monetary Vigilance: Central banks are urged to manage market volatility and anchor inflation expectations through clear communication. The ADB warns that overly aggressive tightening could exacerbate financial instability.
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Energy Demand Management: Governments should implement practical measures to curb demand, such as air-conditioning temperature mandates, electricity-saving campaigns, and incentivizing public transport.
The ADB remains committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.
